According to a report by Centrum Institutional Research, telecom operators in India are expected to continue with regular tariff hikes as part of their strategy to boost their average revenue per sser (ARPU). The industry has already seen three notable tariff increases in December 2019, November 2021, and July 2024. These hikes, the report notes, are likely to persist, supporting revenue growth for telecom companies. With rising tariffs, a shift towards premium plans is anticipated, resulting in higher spending per user.
The report highlighted that ARPU is rising due to strategic pricing decisions and a gradually improving customer mix.
Further as per the report, India’s 2G user base, currently around 250 million, is expected to decline sharply over the next five to six years. Bharti Airtel currently has about 23 per cent of its users on 2G, while Vodafone Idea Limited (Vi) has nearly 40 per cent. However, with growing 4G and 5G adoption, the share of 2G users is projected to become marginal.
A key industry trend is the migration from 2G to 4G and the rise in postpaid subscribers, both contributing to higher ARPU. At the same time, data consumption is on the rise, with users increasingly opting for higher-value plans, such as 2GB-per-day packs over 1GB ones. Revenues from value-added services like international roaming and over-the-top (OTT) subscriptions have nearly doubled over the past five years.
The report added that the telecom sector is currently at a pivotal stage. The competitive environment has stabilised, with Jio, Airtel, and Vi, along with state-run Bharat Sanchar Nigam Limited (BSNL), dominating the market. The rise in ARPU, a better customer mix, and increased data usage are all aiding sectoral growth.
Profitability is also on the upswing, with operating costs stabilising and earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins strengthening. Free cash flow is projected to improve in financial year (FY26–FY27) as capital expenditures begin to taper off following the 5G rollout phase.
Meanwhile, India’s satellite communication space is also gaining traction, supported by policy pushes such as the Telecom Technology Development Fund Scheme and the Telecommunications Act, 2023. Open foreign direct investment (FDI) norms, developments in quantum satellite communication, and the expansion of very small aperture terminal (VSAT) networks are driving momentum in the segment.
Elon Musk’s satellite internet venture, Starlink, has entered into agreements with Airtel and Jio and is in talks with Vi as well. However, the report cautions that Starlink may face headwinds in India due to regulatory barriers, steep import duties, and the need to align with the country’s highly price-sensitive broadband market.
